2. Unit 17: Financial Derivatives Financial English

3. Unit 17: Revision of Unit 16Revision of Unit 16Revision of Unit 16Revision of Unit 16 Background information of Unit 17Background information of Unit 17Background information of Unit 17Background information of Unit 17 Useful points of this unitUseful points of this unitUseful points of this unitUseful points of this unit TextTextText ExercisesExercisesExercises AssignmentAssignmentAssignment

4. Review of Unit 16 DictationDictationDictation Blanks filling Blanks fillingBlanks fillingBlanks filling Revision of Unit 16

5. Dictation Dictation! You are going to hear 5 sentences. Each will be read three times. Write down the sentences according to what you hear. 1.2.3.4.5. Check-up

6. Key to Dictation: 1.An insurance intermediary is an individual or firm that provides advice on insurance and can arrange policies. 2.It is noticed that most of the contingent commissions are passed on to policyholders in the premium. 3.In most insurance transactions, there is an intermediary, usually an insurance agent or broker, between the buyer and the insurer. 4.Insurance intermediaries will go through the competitive market in search of the best placement for their client. 5.In recent years, lots of new operation modes emerged in insurance intermediary market, and innovation becomes an internal impetus. Dictation

7. Fill in the blanks with proper words or phrases given below Blanks filling questioncompensationclaiminspect cause questioncompensationclaiminspect cause difficultsettlementnoticedamageinvoice Mr. Cooper (C) is asking Ms. Wen (W) about the claim for insurance C: One more thing I would like to know is how you deal with _________ for cargo insurance. W: Most of the insurance companies have the policy that immediate __________should be given to the nearest branch or agency in the event of damage ___________ a claim under a policy on goods.

8. C: Then who will be responsible for next step? W: The insurance company will appoint a surveyor to __________ goods and report the nature and extent of the ____________. Usually a kind of certificate of loss will be issued to the consignee who is held responsible for the expense. C: Of course, the claims procedure will vary by circumstances. W: True. But undoubtedly a quicker ___________should be secured in case of losses or damages. C: Would you please tell me what documents are usually required when making an insurance claim? Blanks filling

9. W: Generally the commercial __________issued to the buyer, the original bill of lading, the original policy or certificate of insurance, the survey report evidencing the loss or damage, exchange of correspondence regarding their liability for the loss and also landing situation of the goods at final destination. C: It’s too complicated, I think. W: What we just mentioned is just a theoretical procedure of an insurance claim, in fact when we deal with specific cases, things usually are much more ____________ than you can imagine. Anyway, we aim at providing _________________ for the loss suffered by the insured. C: I get to understand the importance of taking out correct and adequate types of insurance, otherwise our legal rights to the goods will face the danger of suffering from losses or damages. W: For our insurance company, three fundamental principles must be abided by. Blanks filling

10. C: What are they? W: The insurable interest, good faith, and indemnity. C: I’d like to ask you for more information concerning all these aspects we’ve discussed today. W: Okay, if you have any ____________ during your reading, feel free to contact me. C: Thank you again for your kindness. W: May we have more chances to work together. C: Bye! W: Bye! Blanks filling Check-up

11. Mr. Cooper (C) is asking Ms. Wen (W) about the claim for insurance Mr. Cooper (C) is asking Ms. Wen (W) about the claim for insurance C: One more thing I would like to know is how you deal with claims for cargo insurance. W: Most of the insurance companies have the policy that immediate notice should be given to the nearest branch or agency in the event of damage causing a claim under a policy on goods. C: Then who will be responsible for next step? W: The insurance company will appoint a surveyor to inspect goods and report the nature and extent of the damage. Usually a kind of certificate of loss will be issued to the consignee who is held responsible for the expense. Check-up

12. Check-up C: Of course, the claims procedure will vary by circumstances. W: True. But undoubtedly a quicker settlement should be secured in case of losses or damages. C: Would you please tell me what documents are usually required when making an insurance claim? W: Generally the commercial invoice issued to the buyer, the original bill of lading, the original policy or certificate of insurance, the survey report evidencing the loss or damage, exchange of correspondence regarding their liability for the loss and also landing situation of the goods at final destination. C: It’s too complicated, I think.

13. Check-up W: What we just mentioned is just a theoretical procedure of an insurance claim, in fact when we deal with specific cases, things usually are much more difficult than you can imagine. Anyway, we aim at providing compensation for the loss suffered by the insured. C: I get to understand the importance of taking out correct and adequate types of insurance, otherwise our legal rights to the goods will face the danger of suffering from losses or damages. W: For our insurance company, three fundamental principles must be abided by. C: What are they?

14. Check-up W: The insurable interest, good faith, and indemnity. C: I’d like to ask you for more information concerning all these aspects we’ve discussed today. W: Okay, if you have any question during your reading, feel free to contact me. C: Thank you again for your kindness. W: May we have more chances to work together. C: Bye! W: Bye!

15. Text : Background Information 本章旨在 介绍金融衍生品的定义，使学生明 确金融衍生品的概念，了解常见金融衍生品的 种类，知道金融衍生品的套期保值和投机功能， 了解金融衍生品交易的风险和收益。

16. Text : Useful points of this unit 本章重点 : 通过本章学习，学生应该掌握 1 、金融衍生品的种类 2 、金融衍生品的功能 3 、金融衍生品的风险和收益

17. Unit 17: 17.1 Introduction to Financial Derivatives 17.1 Introduction to Financial Derivatives 17.2 Types of Financial Derivatives 17.2 Types of Financial DerivativesETDOTC 17.3 Functions of Financial Derivatives 17.3 Functions of Financial DerivativesHEDGINGSPECULATION 17.4 Risks and Benefits 17.4 Risks and Benefits

18. Listening Text 17.1 Introduction to Financial Derivatives Listen carefully to the first part of the text and then try to understand it.

19. Financial derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying on which a derivative is based can be an asset (e.g., commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (e.g., interest rates, exchange rates, stock market indices, consumer price index (CPI)), or other items (e.g., weather conditions, or other derivatives). Credit derivatives are based on loans, bonds or other forms of credit. derivativesderived from underlyingequitiesresidential mortgagesreal estateindexderivativesderived from underlyingequitiesresidential mortgagesreal estateindex Text :

20. The main kinds of derivatives are: forwards (which if traded on an exchange are known as futures); options; and swaps. Because the value of a derivative is contingent on the value of the underlying, the notional value of derivatives is recorded off the balance sheet of an institution, although the market value of derivatives is recorded on the balance sheet. is contingent on notional value balance sheet is contingent on notional value balance sheet Text : End of part 1

21. derivative n. a financial instrument whose value is based on another security. 衍生品 Text : Language Points derive from 从 … 获得 …, 来自 … ， 起源于 … underlying adj. fundamental, being or involving basic facts or principles 基本的， 根本的 It's the essential nature or underlying reality. 这就是真实的重要本性。 The underlying principle behind Intranet theory is "information democracy". 内部网理论背后的基本原理是 “ 信息民主 ” 。 equityn. the ownership interest of shareholders in a corporation 股本， 股票

22. residential mortgage 住宅按揭， 住宅抵押 mortgage n. / vt. 抵押 repay one's mortgage in monthly instalment 每月分期付款偿还抵押借款 Text : Language Points real estateproperty in the form of land and buildings, rather than personal possessions. 不动产 indexn. a number or ratio (a value on a scale of measurement) derived from a series of observed facts; can reveal relative changes as a function of time 指数 (pl. indexes or indices)

23. be contingent ondetermined by conditions or circumstances not yet established 视情况条件而定的 Our arrival time is contingent on the weather. 我们的抵达时间取决于天气情况。 Text : Language Points notional valuethe face value of the underlying instruments on which derivatives are traded. 名义价值 ， 名目金额 balance sheetn. a record of the financial situation of an institution on a particular date by listing its assets and the claims against those assets 资产负债表， 决算 表， 平衡表

24. Listening Text 17.2 Types of Financial Derivatives Listen carefully to the second part of the text and then try to understand it.

25. Broadly speaking there are two distinct groups of derivative contracts, which are distinguished by the way they are traded in market. Exchange-traded derivatives (ETD) Exchange-traded derivatives (ETD) Over-the-counter (OTC) Over-the-counter (OTC) Text :

26. Exchange-traded derivatives (ETD) are those derivatives products that are traded via specialized derivatives exchanges or other exchanges. A derivatives exchange acts as an intermediary to all related transactions, and takes initial margin from both sides of the trade to act as a guarantee. The world's largest derivatives exchanges (by number of transactions) are the Korea Exchange (which lists KOSPI Index Futures & Options), viamarginKorea Exchange viamarginKorea Exchange Text :

27. Eurex (which lists a wide range of European products such as interest rate & index products), and CME Group (made up of the 2007 merger of the Chicago Mercantile Exchange and the Chicago Board of Trade and the 2008 acquisition of the New York Mercantile Exchange). According to the Bank for International Settlements, the combined turnover in the world's derivatives exchanges totaled US$ 344 trillion during the fourth quarter of 2005. Eurex (which lists a wide range of European products such as interest rate & index products), and CME Group (made up of the 2007 merger of the Chicago Mercantile Exchange and the Chicago Board of Trade and the 2008 acquisition of the New York Mercantile Exchange). According to the Bank for International Settlements, the combined turnover in the world's derivatives exchanges totaled US$ 344 trillion during the fourth quarter of 2005. EurexCME Group the Bank for International Settlementsturnover EurexCME Group the Bank for International Settlementsturnover Text :

28. Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is unregulated. OTC derivatives are largely subject to counterparty risk, as the validity of a contract depends on the counterparty's solvency and ability to honor its obligations. exotic options solvencyexotic options solvency Text : End of part 2

29. via prep. by making use of that means or person or through a place on the way to your destination 经由， 经过，通过 to travel from Beijing to Shanghai via Tianjin 由北京经由天津去上海 I sent a message to Mary via her brother. 我托玛丽的兄弟把信带给她。 Text : Language Points margin n. the amount of collateral a customer deposits with a broker when borrowing from the broker to buy securities 保证金 Korea Exchange 韩国证券交易所

30. Text : Language Points Eurex 欧洲期权与期货交易所 Eurex 欧洲期权与期货交易所 CME Group 美国芝加哥交易所集团 the Bank for International Settlements 国际清算银行 turnover n. 销售量, 营业额 Our remuneration increase with the turnover. 我们的报酬随营业额的增加而增加。 我们的报酬随营业额的增加而增加。 Turnover tax = business tax 营业税

31. exotic optiona type of option with a more complicated pay-out structure than a plain vanilla put or call option. 第二代期权组合 exotic adj. 异国的 Their taste runs to exotic food. 他们喜欢吃外国风味的食品。 Text : Language Points solvencyn. the ability to meet maturing obligations as they come due 偿付能力 We should be much obliged if you would give us your opinion of their solvency and trustworthiness. 贵方对该公司的付款能力与信用状况持何看法，恳请告知，则 感厚谊。

32. Listening Text 17.3 Functions of Financial Derivatives Listen carefully to the third part of the text and then try to translate some sentences.

33. Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation. mitigatehedgingspeculationmitigatehedgingspeculation HEDGING HEDGINGHEDGING SPECULATION SPECULATIONSPECULATION Text : Sentence Translation Sentence Translation

34. HEDGING Derivatives allow risk about the value of the underlying asset to be transferred from one party to another. For example, a wheat farmer and a miller could sign a futures contract to exchange a specified amount of cash for a specified amount of wheat in the future. Both parties have reduced a future risk: for the wheat farmer, the uncertainty of the price, and for the miller, the availability of wheat. However, there is still the risk that no wheat will be available due to causes unspecified by the contract, like the weather, or that one party will renege on the contract. (Although a third party, called a clearing house, insures a futures contract, not all derivatives are insured against counterparty risk.)counterparty risk Text :

35. From another perspective, the farmer and the miller both reduce a risk and acquire a risk when they sign the futures contract: The farmer reduces the risk that the price of wheat will fall below the price specified in the contract and acquires the risk that the price of wheat will rise above the price specified in the contract (thereby losing additional income that he could have earned). The miller, on the other hand, acquires the risk that the price of wheat will fall below the price specified in the contract (thereby paying more in the future than he otherwise would) and reduces the risk that the price of wheat will rise above the price specified in the contract. In this sense, one party is the insurer (risk taker) for one type of risk, and the counterparty is the insurer (risk taker) for another type of risk. Text :

36. Hedging also occurs when an individual or institution buys an asset (like a commodity, a bond that has coupon payments, a stock that pays dividends, and so on) and sells it using a futures contract. The individual or institution has access to the asset for a specified amount of time, and then can sell it in the future at a specified price according to the futures contract. Of course, this allows the individual or institution the benefit of holding the asset while reducing the risk that the future selling price will deviate unexpectedly from the market's current assessment of the future value of the asset.deviate Text : Sentence Translation Sentence Translation

37. SPECULATION Derivatives can be used to acquire risk, rather than to insure or hedge against risk. Thus, some individuals and institutions will enter into a derivative contract to speculate on the value of the underlying asset, betting that the party seeking insurance will be wrong about the future value of the underlying asset. Speculators will want to be able to buy an asset in the future at a low price according to a derivative contract when the future market price is high, or to sell an asset in the future at a high price according to a derivative contract when the future market price is low.speculate Text :

38. Individuals and institutions may also look for arbitrage opportunities, as when the current buying price of an asset falls below the price specified in a futures contract to sell the asset.arbitrage Speculative trading in derivatives gained a great deal of notoriety in 1995 when Nick Leeson, a trader at Barings Bank, made poor and unauthorized investments in futures contracts. Through a combination of poor judgment, lack of oversight by the bank's management and by regulators, and unfortunate events like the Kobe earthquake, Leeson incurred a $1.3 billion loss that bankrupted the centuries-old institution.Barings Bank Text : End of part 3

39. Text : Key to Translation 金融衍生品可以减少因待交易金融产品价格波动而造 成的经济损失，这就是所谓的保值。另外，如果价格 变动预期正确，金融衍生品也可以为投资者带来利益， 这就是所谓的投机。

40. Text : Key to Translation 不论是个人还是企业购买了资产（比如某种商品、债 券、股票等），并打算以期货形式卖出时，就会形成 所谓的套期保值。按照期货合约的规定，资产所有人 不论是个人还是企业都可以先获取资产然后在未来某 一确定的时间以商定的价格将该资产卖出。

41. mitigatevt. to make it less unpleasant, serious, or painful. 使缓和， 减轻 Nothing could mitigate the cruelty with which she had treated him. 她对他太残暴了，实在是罪无可恕。 to mitigate the sufferings of the dying woman 尽可能减轻这垂死妇人的痛苦 Text : Language Points hedgingn. any technique designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change 套期保值， 对冲交易 speculationn. an investment that is very risky but could yield great profits 投机

42. counter-party riskthe risk that the opposite party to a contract defaults on its obligations 交易对手风险 countern. 相反的事；反对物 ; 反方向地（的）； counter-envelopment on double flanks 反合围 Inform against a counter-revolutionary 检举一个反革命分子 He acted counter to his promise. 他的行动与他的诺言相反。 Text : Language Points

43. deviatevi. to differ or diverge or cause to differ or diverge, as in belief or thought;to turn aside or cause to turn aside; 越 ( 轨 ), 脱离 ( 常轨 ); 违背 ; 偏斜, 离题 His remarks usually deviate from truth. 他的话通常都与事实不符。 Don’t deviate from the principle. 不要违背原则。 I will never deviate from what I believe to be right. 我绝不背离我自信正确的道路。 Text : Language Points

44. speculatevi. to buy or sell securities, property, etc, in the hope of deriving capital gains 投机 ( in/on); to conjecture without knowing the complete facts 沉思, 思索, 揣想, 设 想, 推测 ( about, on, upon) speculate about the origin of the universe 推测宇宙的起源 speculate in stocks 做股票投机 speculate on a rise [fall] 做多头 [ 空头 ] 投机, 赌涨 [ 跌 ] I've been -ting on my future. 我一直在思索我的未来。 How to Speculate with Stock Index Futures 如何以股价指数期货投机 Text : Language Points

45. arbitragen. a kind of hedged investment meant to capture slight differences in price ； the activity of buying shares or currency in one financial market and selling it at a profit in another. 套利 Text : Language Points Barings Bank 巴林银行是英国历史最悠久的银行之一， 于 1995 年 2 月 26 日倒闭，其原因是一位名为尼克 李森 （ Nick Leeson ）的交易员在衍生性金融商品的超额交 易，投机失败，导致损失 14 亿美元。

46. Listening Text 17.4 Benefits and Risks Listen carefully to the fourth part of the text and then try to translate some sentences.

47. RISKS Derivatives are often subject to the following criticisms:  Possible large losses Possible large losses Possible large losses  Derivatives (especially swaps) expose investors to counter- party risk Derivatives (especially swaps) expose investors to counter- party risk Derivatives (especially swaps) expose investors to counter- party risk  Unsuitably high risk for small or inexperienced investors Unsuitably high risk for small or inexperienced investors  Large notional value Large notional value  Leverage of an economy's debt Leverage of an economy's debt BENEFITS Text :

48.  Possible large losses The use of derivatives can result in large losses due to the use of leverage, or borrowing. Derivatives allow investors to earn large returns from small movements in the underlying asset's price. However, investors could lose large amounts if the price of the underlying moves against them significantly. There have been several instances of massive losses in derivative markets, such as the need to recapitalize insurer American International Group (AIG) with $85 billion of debt provided by the US federal government. An AIG subsidiary had lost more than $18 billion over the preceding three quarters on Credit Default Swaps (CDS) it had written. It was reported that the recapitalization was necessary because further losses were foreseeable over the next few quarters. recapitalizeAIGsubsidiaryprecedingCDSrecapitalizeAIGsubsidiaryprecedingCDS Text : Sentence Translation Sentence Translation

49.  Derivatives (especially swaps) expose investors to counter-party risk For example, suppose a person wanting a fixed interest rate loan for his business, but finding that banks only offer variable rates, swaps payments with another business who wants a variable rate, synthetically creating a fixed rate for the person. However if the second business goes bankrupt, it can't pay its variable rate and so the first business will lose its fixed rate and will be paying a variable rate again. If interest rates have increased, it is possible that the first business may be adversely affected, because it may not be prepared to pay the higher variable rate. syntheticallyadverselysyntheticallyadversely Text :

50. Different types of derivatives have different levels of risk for this effect. For example, standardized stock options by law require the party at risk to have a certain amount deposited with the exchange, showing that they can pay for any losses; Banks who help businesses swap variable for fixed rates on loans may do credit checks on both parties. However in private agreements between two companies, for example, there may not be benchmarks for performing due diligence and risk analysis. benchmarksduediligencebenchmarksduediligence Text :

51.  Unsuitably high risk for small or inexperienced investors Derivatives pose unsuitably high amounts of risk for small or inexperienced investors. Because derivatives offer the possibility of large rewards, they offer an attraction even to individual investors. However, speculation in derivatives often assumes a great deal of risk, requiring commensurate experience and market knowledge, especially for the small investor, a reason why some financial planners advise against the use of these instruments. Derivatives are complex instruments devised as a form of insurance, to transfer risk among parties based on their willingness to assume additional risk, or hedge against it. assumescommensurateassumescommensurate Text :

52.  Large notional value Derivatives typically have a large notional value. As such, there is the danger that their use could result in losses that the investor would be unable to compensate for. The possibility that this could lead to a chain reaction ensuing in an economic crisis, has been pointed out by legendary investor Warren Buffett in Berkshire Hathaway's annual report. Buffett called them 'financial weapons of mass destruction.' The problem with derivatives is that they control an increasingly larger notional amount of assets and this may lead to distortions in the real capital and equities markets. Investors begin to look at the derivatives markets to make a decision to buy or sell securities and so what was originally meant to be a market to transfer risk now becomes a leading indicator. Warren Buffett distortionsWarren Buffett distortions Text :

53.  Leverage of an economy's debt Derivatives massively leverage the debt in an economy, making it ever more difficult for the underlying real economy to service its debt obligations and curtailing real economic activity, which can cause a recession or even depression. In the view of Marriner S. Eccles, U.S. Federal Reserve Chairman from November, 1934 to February, 1948, too high a level of debt was one of the primary causes of the 1920s-30s Great Depression. curtailingU.S. Federal Reserve curtailingU.S. Federal Reserve Text :

54. BENEFITS Nevertheless, the use of derivatives also has its benefits: Derivatives facilitate the buying and selling of risk, and thus have a positive impact on the economic system. Although someone loses money while someone else gains money with a derivative, under normal circumstances, trading in derivatives should not adversely affect the economic system because it is not zero sum in utility. facilitate Former Federal Reserve Board chairman Alan Greenspan commented in 2003 that he believed that the use of derivatives has softened the impact of the economic downturn at the beginning of the 21st century. Alan Greenspan Alan Greenspan Text : End of part 4 Sentence Translation Sentence Translation

55. Text : Key to Translation 由于杠杆作用，或者叫借钱交易，因为金融衍生品允许 投资者通过标的资产价格的细微变动获得丰厚回报，相 应的金融衍生品也就可能导致巨额损失。也就是说当标 的资产价格的变动方向与投资者预期反向变化时，投资 者会赔钱。

56. Text : Key to Translation 金融衍生品交易推动了风险买卖，促进了经济发展。尽 管有人赚钱有人赔钱，在正常情况下，由于并非零和效 益，金融衍生品的交易不会阻碍经济发展的步伐。

57. recapitalize vt. 再投资 ; 改变 [ 调整 ]... 的资本结构 Text : Language Points AIG 美国国际集团。美国国际集团是世界保险和金 融服务的领导者，也是全球首屈一指的国际性保险 服务机构，业务遍及全球一百三十多个国家及地区， 其成员公司通过世界保险业最为庞大的财产保险及 人寿保险服务网络，竭诚为各商业、机构和个人客 户提供服务。当 2008 年美国房地产市场日益变糟时， AIG 仍深信信用违约互换（ CDS ）资产组合将能挺 过风暴。此后， AIG 遭到了来自监管机构的压力。 AIG 的债券被调降。 2008 年９月 16 日联邦储备银行 向陷于破产边缘的美国国际集团ＡＩＧ提供 850 亿 美元紧急贷款，贷款将以ＡＩＧ的全部资产为抵押， 美国政府将持有该集团近 80 ％股份。

58. subsidiaryn. short for subsidiary company 子公司 母公司 parent company 母公司 parent company Uh guano company will set up a sale subsidiary in singapore. 华光公司将在新加坡建立一个子公司。 华光公司将在新加坡建立一个子公司。 Text : Language Points precedingadj.going or coming before; former 在前的, 前面的 Each generation surpasses the preceding one. 一代更比一代强。 一代更比一代强。 CDS 信贷违约掉期 : 一种转移交易方定息产品信贷风 险的掉期安排。 就是给金融衍生品的信用作担保

59. syntheticallyadv. by synthesis; in a synthetic manner 综 合地， 合成地 some of these drugs have been derived from opium and others have been produced synthetically. 这些毒品有的是从鸦片中得来的， 而其他一些则是合成的。 这些毒品有的是从鸦片中得来的， 而其他一些则是合成的。 Text : Language Points adverselyadv. in an adverse manner 逆地, 反对地 She was adversely affected by the new regulations. 新的规章制度给她带来了诸多不便。 新的规章制度给她带来了诸多不便。 Therefore, nations and states with high levels of pollution can adversely affect those with the strictest pollution laws. 因此，那些污染较严重的国家和地区反过来影响有着严格的污染法 律规范的国家和地区。 因此，那些污染较严重的国家和地区反过来影响有着严格的污染法 律规范的国家和地区。

60. benchmarkn. a standard by which something can be measured or judged 基准 Text : Language Points diligencen.steady and careful application 勤奋， 勤勉 Care and diligence bring luck. 谨慎和勤奋才能抓住机遇。 谨慎和勤奋才能抓住机遇。 dueadj. requisite; fitting; proper;adequate or sufficient; enough 适当的 ; 应做的 ; 应得的 ; 足够的 When is the train due at Shanghai? 火车该什么时候到上海 ? 火车该什么时候到上海 ? Her illness was due to bad food. 她的病是坏了的食物造成的。 她的病是坏了的食物造成的。

61. assumevt. take power or responsibility 承担 assume the reins of government 执政, 开始掌权 assume a leading position 担任领导职务 assume responsibility 负责, 承担责任 Text : Language Points commensurateadj. corresponding in size or degree or extent 相应的, 相称的 The pay should be commensurate with the work. 工资应与工作相称才是。

62. Warren Buffett 沃伦 · 巴菲特，世界上最伟大的投资 者, 股神。 Text : Language Points distortionn. changing of something into something that is not true or not acceptable 歪曲，失真 a hopeless distortion of the truth 肆意歪曲真理 Berkshire Hathaway 伯克希尔 - 哈撒韦公司， 1965 年,35 岁的巴菲特收购的一家濒临破产纺织企业， 1994 年 底已发展成拥有 230 亿美元的伯克希尔工业王国，由 一家纺纱厂变成巴菲特庞大的投资金融集团。

63. curtailvt. place restrictions on 限制 John's father curtail his allowance. 约翰的父亲减少了他的零用钱。 约翰的父亲减少了他的零用钱。 The minister had to curtail his visit. 部长不得不缩短访问日期。 部长不得不缩短访问日期。 Text : Language Points U.S. Federal Reserve 美国联邦储备系统于 1913 年 国会立法通过后成立，是美国的中央银行。

64. facilitatevt.to make easier; assist the progress of 使容 易, 使 不费力, 帮助, 促进 Modern devices facilitatedomestic work. 现代设备使家务活便利了。 It would facilitate matters if you were more co-operative. 要是你再合作些，事情就会变得更容易。 The new underground railway will facilitate the journey to all parts of the city. 新的地下铁路将为去城市各处提供方便。 Text : Language Points Alan Greenspan 艾伦 · 格林斯潘（ 1926 年 3 月 6 日－），美 国犹太人，美国第十三任联邦储备委员会主席。 Alan Greenspan 艾伦 · 格林斯潘（ 1926 年 3 月 6 日－），美 国犹太人，美国第十三任联邦储备委员会主席。他被媒体 业界看做是 “ 经济学家中的经济学家 ” 和 “ 大师 ” 。

65. Exercises of Unit 17 True or FalseTrue or FalseTrue or FalseTrue or False Case Analysis Case AnalysisCase AnalysisCase Analysis Discussion DiscussionDiscussion Exercises of this Unit

66. True or False 1. Forwards have the same meaning as futures. ( ) 2. The value of a derivative is contingent on the value of the underlying. The notional value of derivatives is recorded off the balance sheet of an institution, while the market value of derivatives is recorded on the balance sheet. ( ) 3. Few types of derivative instruments may trade on traditional exchanges. ( ) 4. The ETD derivative market is the largest market for derivatives, and is unregulated. ( ) 5. Depending on the terms of the contract, the potential gain or loss on a derivative can be much higher than if they had traded the underlying security or commodity directly. ( ) Text : Exercise Check-up

67. True or False 1. Forwards have the same meaning as futures. (F) 2. The value of a derivative is contingent on the value of the underlying. The notional value of derivatives is recorded off the balance sheet of an institution, while the market value of derivatives is recorded on the balance sheet. (T) 3. Few types of derivative instruments may trade on traditional exchanges. (F) 4. The ETD derivative market is the largest market for derivatives, and is unregulated. (F) 5. Depending on the terms of the contract, the potential gain or loss on a derivative can be much higher than if they had traded the underlying security or commodity directly. (T) Text : Exercise

68. Case Analysis Read the materials below and try to analysis the two sides of the sword of financial derivatives. Will the benefit attract you? Or are you scared by the high risks? Text : Exercise Check-up

69. 1. In recent years, derivatives have been associated with a few truly notable events, including the collapses of Barings by René M. STULZ, Third Quarter 2005 Bank (the Queen of England’s primary bank) and Long-Term Capital Management (a hedge fund whose partners included an economist with a Nobel Prize awarded for breakthrough research in pricing derivatives). Derivatives even had a role in the fall of Enron. Indeed, just two years ago, Warren Buffett concluded that “derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” Michael Morgenstern, the Milken Institute Review. Text : Case Analysis

70. 2. A U.S. exporter who expects to receive a €100 million payment for goods in six months. Suppose that the price of the euro is $1.20 today. If the euro were to fall by 10 percent over the next six months, the exporter would lose $12 million. But by selling Euros forward, the exporter locks in the current forward exchange rate. If the forward rate is $1.18 (less than $1.20 because the market apparently expects the euro to depreciate a bit), the exporter is guaranteed to receive $118 million at maturity. （ END OF THE CASE ） Text : Case Analysis

71. Will the benefit attract you? Or are you scared by the high risks 。 1. Although some serious dangers are associated with derivatives, handled with care they have proved to be immensely valuable to modern economies, and will surely remain so. 2. In the second example, the financial position is a forward contract, the risk is depreciation of the Euro, and the exposure is €100 million in six months, which is perfectly hedged with the forward contract. Since no money changes hands when the exporter buys Euros forward, the market value of the contract must be zero when it is initiated, since otherwise the exporter would get something for nothing. Text : Key to Case Analysis

72. Discussion Hedge is often mentioned in financial derivatives. Discuss with your partner about the function of hedging. Text : Discussion

73. Assignments 1. Review the Text. 2.Keep in mind the functions of financial derivativesthe functions of financial derivatives Benefits and Risksof financial derivativesBenefits and Risks of financial derivatives 3.Do exercises in the book.